Starting a new business is a simultaneously exciting and terrifying prospect all at once, and one of the most common sources of stress is funding. There are very few businesses that do not require at least some working capital to get off the ground, and even fewer that will survive without establishing a healthy cashflow as soon as possible.

The reality is, however, that bank loans for start-ups can be almost impossible to come by as they have no credit or trading history and minimal collateral to offer the lender. And for those lucky enough to be accepted for a loan, they are starting off their business’ journey with a debt on their balance sheet.

There is, however, another way.

Instead of having to wait weeks or months for customers to pay their invoices, an invoice finance facility enables businesses to treat their unpaid invoices as assets and access up to 90% of their value straight away.

Invoice Finance for Start-ups and New Businesses

Invoice finance can be a great funding tool for startups and new businesses as it enables them to access much-needed capital for growth without incurring debt. It can even be used to unlock the value of invoices for businesses with contracts or projects not due to be completed until a later date.

A big reason for this is that unlike many other forms of commercial finance (e.g., asset finance or loans), invoice finance providers are not assessing a business’ creditworthiness or trading history – they are more interested in your customers, i.e., how likely is it that your customers will settle their invoices.

Once set up, an invoice finance facility provides businesses with a healthy cashflow that can be used to cover the costs involved in setting up, ongoing operational costs, investments, and growth.

Benefits of Invoice Finance for Start-ups

Speedy access to funds

Many other types of commercial finance can be complicated and time-consuming to access, especially if you are dealing with a bank. In some cases, it could be weeks or months to get hold of cash that you can’t move forward without. Once an invoice finance facility is established – which should only take a few days – you will be able to access the cash from new invoices in a matter of hours.

A scalable solution

Your invoice finance facility can grow alongside your business meaning you can take on new customers and bigger contracts without worrying about having to find more funding.

Build your business’ credit

It is important to build your credit in the early days of trading but having no credit or trading history can make this difficult. An invoice finance facility is based on the creditworthiness of your debtors so you can use it from day one, and as it helps you settle your debts, it can also help you build up a healthier credit rating.

Accelerate growth

Often a new business is working on a very tight budget which can mean that they have to prioritise funding essential operating costs over other areas that might bring growth like marketing, product development, or recruitment. Invoice finance can give you access to the cash you need to make this growth happen sooner rather than later.

Tailored solution

Every business is unique so as you might imagine, so invoice finance is not a one-size-fits-all facility. There are lots of providers out there willing to work with you to find a process that suits your needs.

What can invoice finance help your business to achieve?

The improved cashflow that invoice discounting can bring enables many business owners to achieve more than they thought possible. Releasing capital is not only a good idea from a financial stability point of view, improving your liquidity in general, but it can also help to accelerate growth in several ways.

Here are just a few examples.

• Recruiting experienced and talented staff.
• Ordering supplies/stock.
• Accessing early payment discounts from suppliers.
• Paying HMRC bills in full and on time, avoiding penalties.
• Acting on opportunities for growth in the marketplace without delay.
• Investing in equipment, vehicles, renewable technology or improving facilities that boost your operation or streamline efficiency.
• Acquisitions or management buyouts.

How does invoice finance work?

1. You would carry out your services or deliver your goods as usual.
2. In addition to sending your invoice to customer, you would also send it to your invoice finance provider.
3. The invoice finance provider will advance you up to 90% of the value of the invoice, typically just a few hours after receiving it.
4. When your customer has paid their invoice, you will receive the remaining balance of the invoice, minus a pre-agreed fee for the provider’s service.

What’s the difference between invoice discounting and invoice financing?

You will probably come across the terms ‘invoice factoring’ and ‘invoice discounting’. Both are types of invoice finance that unlock cash tied up in unpaid invoices, but there are differences between the two options.

Control of sales ledger

With an invoice factoring service, the provider will manager your sales ledger and collect payment from your customers on your behalf. However, with invoice discounting, you maintain control of your sales ledger and payment collection.

Confidentiality

If you use an invoice factoring service, the provider will be managing your sales ledger and so your customers will be aware that your invoices are being factored. With invoice discounting, your customers do not need to know you using the service.

Price

Generally, the fees involved in invoice factoring are expensive than invoice discounting as with a factoring facility you are paying for an outsourced collections department, whereas with invoice discounting you keep this inhouse.

Retaining control of your customer relationships in the early stages of setting up a business is crucial, as is the need to keep outgoing costs as low as possible, so it makes sense that invoice discounting is a popular choice for younger businesses where more established organisations may choose to outsource the process via invoice factoring.

Need to unlock working capital for your start-up?

At Bluestone we work with one of the largest funding panels in the UK, many of which offer fantastic invoice finance facilities for new businesses.

If you are interested in accelerating your growth with an invoice finance facility, get in touch with us today. If it’s the right choice for your business, we can arrange an invoice finance facility with one of our industry leading partners ASAP.  

Complete the form below to send us an enquiry.

Uncertainty, pressure, stress, anxiety, fear.

Worrying about supporting your family.

Working longer hours.

Losing sleep.

Skipping meals or pushing self-care off your to-do list completely.

Burnout – mental and physical exhaustion.

The last few years have been some of the toughest we have seen in our lifetime and for many self-employed people, the impact can be even more intense. Building and growing a business in a thriving economy brings plenty of pitfalls and stresses, but doing so throughout a pandemic, recession and cost-of-living crisis that is largely out of your control takes those challenges to another level.

For Mental Health Awareness Week 2023, mental health charity, Mind, are focusing on the impact of the cost-of-living crisis on our mental health.

At Bluestone we work with UK business owners to help them fund growth and manage their financial strategy more effectively, and as Mind is one of the charities we support on a regular basis, this week’s blog highlights how the cost-of-living crisis is damaging the mental health of business owners, as well as some tips and practical solutions that may provide support during tough times.

Rising costs, rising stress

Businesses of every size across a wide range of sectors are facing:

• Reduced revenue because customers are reducing their spending.
• Interest rates increasing on mortgages, credit cards, loans, and overdrafts.
• Increasing energy costs and the cost of supplies/materials eating into profit margins or forcing price rises – potentially losing customers in the process
• Staff requests for pay rises in line with cost of living.
• Cash flow issues.
• Lack of funds to replace broken or old equipment affecting quality of service/product and efficiency.
• Tax bills to pay like self-assessment, corporation tax, or the cost of professional indemnity insurance.

Mind’s website has plenty of information about the ‘2-way link between money and mental health’:

‘This crisis is hitting everyone from all directions with a speed and severity we’ve not seen in decades. It’s hard to overstate how big an impact this is going to have on our mental health. This is an emergency. An emergency everyone needs help to deal with.

‘We’re already clear that poverty and mental health problems have a 2-way link that needs to be broken. If we’re not careful, this crisis will push more people into that cycle. More people are experiencing mental health problems because of this crisis. And people who already had a mental health problem are struggling more. We just can’t let that happen.’

Mind

Mental health problems can affect the way you deal with money in several ways. If you’re feeling low or depressed, you may lack motivation or energy to manage your finances. You might make impulsive financial decisions, or poor mental health might prevent you from managing your financial responsibilities effectively or making decisions that generate profit, reducing your income.

In addition, you might find yourself avoiding doing things like opening bills, communicating with creditors, or checking your accounts to stay on top of your money.

All this can worsen money problems leading to feelings of anxiety and panic, and worrying about money can lead to sleep problems.

You may not be able to afford to not only operate or grow your business, but you may also stop spending money on basic essentials like nutritious food, housing, water, heating, or medication. You might feel lonely or isolated, potentially hiding the extent of your money problems from loved ones, which will impact your social life and relationships.

Mental Health at Work

Mental Health at Work, a programme led by the Mental Health at Work Leadership Council and curated by Mind, has partnered with Simply Business to improve the level of mental health support available for UK small business owners.

They recently surveyed over 700 small business owners (conducted by Mental Health at Work and Simply Business) and found that 56% have experienced poor mental health in the last 12 months, but 45% wouldn’t seek support for their mental health.

In the same survey, 51% reported feelings of stress, 39% say they have suffered with anxiety, and almost one in four (23%) have experienced insomnia. Depression (20%) and loneliness (19%) were also shown to be common.

Getting the right support

“Running a business can be very stressful. We encourage SME owners to form a ‘well-being plan’, akin to a business plan. Focusing on what your wellbeing intentions are for the business; how will you support your own and your employee’s mental health? It is unsurprising that business owners prioritise financial success, rather than their wellbeing […]

“Getting therapeutic support for stress does not mean waiting until crisis point. Those that have a strategic, proactive approach to managing stress find it easier to intervene early, which means that signs of impaired well-being are recognised before they become problematic. This is where accessing independent, qualified therapeutic help can be the game-changer.”

British Association of Counselling and Psychotherapy website

Mind

Further information and support on coping with the cost-of-living crisis: Mental Health Awareness Week – Mind

British Association of Counselling and Psychotherapy

Find a mental health professional near you: Contact BACP

Mental Health at Work Support for Small Businesses

For practical tips, support and advice for you or your employees, click here.

Easing financial pressure on your business

It is also worth exploring financial solutions (with fixed interest rates) that may ease pressure on your business’ cashflow.

• Asset finance may enable you to invest in equipment that your business needs without parting with a large chunk of cash, i.e., spreading the cost via fixed affordable payments.
• Invoice finance can unlock cash tied up in unpaid customer invoices.
• Cashflow loans can be used to bridge a monetary gap, e.g., paying wages, covering bills, giving more financial breathing space.
• Tax loans can be used to spread the cost of your self-assessment or corporation tax bills over time.

If you would like to explore any of these financial solutions to see if they could give your business’ finances a boost and take some of your stress away, contact our team for a no-obligation conversation about your options.

Remember, without the owner and their employees, businesses no longer exist, and having a healthy business is much more than numbers on balance sheet. When you invest time in your mental health by seeking appropriate support and prioritising your wellbeing, you are also investing in your business’ future.

Dating back to 1970, EARTHDAY.ORG’s mission is to diversify, educate and activate the environmental movement worldwide. EARTHDAY.ORG is the world’s largest recruiter to the environmental movement, working with more than 150,000 partners in over 192 countries to drive positive action for our planet. By rallying the efforts of businesses, governments, and individual citizens around a particular date the organisation aims to stimulate real action and longer-term change.

There is no getting away from the fact that making significant progress towards a net-zero future will not happen without spending money. However, in many cases it is the need for expenditure that delays or prevents investment in renewable energy. As a business owner in the present economic climate, reducing carbon emissions may feel like a non-essential project, or something that can be dealt with later when you have more cash in the bank.

In reality, it is possible to take that first step towards a greener business without parting with a large amount of cash. Renewable technology that will reduce your business’ carbon emissions and running costs can be financed, spreading the cost of the investment over time. In many cases, businesses are able to cover their finance repayments with the money they save on their energy costs. We know that energy prices are rising steeply and likely to continue to do so, squeezing businesses of all sizes of their profit margins.

Here we outline some of the most effective ways that you can invest in both the future of your business and our planet.

Install LED lighting

Switching to LED lighting in your business could reduce your carbon footprint and save you a significant amount of money on your energy costs. LEDs (light emitting diodes) use less energy, last longer, and produce a better quality of light than traditional lighting. In fact, LED lighting could reduce your annual energy consumption by at least 50%.

• LED lighting is significantly more energy-efficient than many traditional lighting systems as it produces more ‘useful lumens’, i.e., less of the energy consumed by the light is wasted through heat dissipation. This makes LED lighting at least 50% cheaper to power, depending on the type of lighting being replaced.
• LED lighting uses electricity more efficiently, so your business’ energy consumption and therefore your impact on the planet should reduce by at least 50%.
• LED lighting lasts longer. After 25,000 hours traditional lighting will be operating at less than 80% of its potential output. An LED lightbulb lasts, on average, for 50,000 hours and, if used efficiently, for as long as 100,000 hours.
• LED lights do not include mercury like fluorescent and mercury vapor lights, so they do not require the same maintenance or management at the end of their life.
• LED lighting provides a better quality of light providing improved visibility and colour clarity, safer working conditions for staff and improved security and CCTV footage.

Click here for more information on installing LED lighting.

Install solar panels

Solar panels convert natural energy from sunlight into free electricity for your business. Unlike electricity generated through traditional methods, solar electricity is carbon free. This not only reduces electricity costs in the present but will also protect businesses from future rises in energy prices.

Commercial solar panels are installed on the roof of a business’ premises where they will exposed to as much sunlight as possible. The cells in the panels capture the sun’s energy which is then converted to usable electricity for the business to use. As most businesses carry out their activities during the day, which is when solar panels will produce the most energy, the resulting electricity savings can be significant.

There are several advantages for businesses when it comes to solar panels, including but not limited to:

• Considerable electricity cost savings
• Financial stability and energy security/flexibility
• A greatly reduced carbon footprint
• Improved public perception of your business through Corporate Social Responsibility (CSR).

Click here for more information on installing solar panels.  

Switch to an electric vehicle fleet

If your business has a fleet of petrol or diesel vehicles, switching to an electric fleet could slash your emissions overnight. Electric vehicles produce zero tailpipe emissions and are usually significantly cheaper to run than their fossil fuel counterparts.

Electric vehicles are better for the planet

Vehicles that run on fossil fuels like petrol and diesel emit carbon from their exhaust, a major greenhouse gas that is causing our planet’s climate to change, as well as air pollutants like sulphur dioxide (SO2), nitrogen oxides (NOx) and particulate matter (PM) – all of which all harmful to our health. The combustion engines in petrol and diesel cars are also responsible for a lot of noise pollution. EVs run on batteries rather than fossil fuels which means they don’t emit vast amounts of carbon dioxide into the air from their tailpipes (a major cause of climate change). They are also much quieter when running which helps to reduce the noise pollution on our roads.

Electric vehicles are the future

The UK government has a target for all new cars and vans sold in the UK to be electric by 2030, and cities are beginning implementing Clean Air Zones; vehicles exceeding emissions standards will have to pay to travel through a Clean Air Zone. Bath and Birmingham have already established Clean Air Zones, with many more set to follow suit in the coming years.

Electric vehicles are cheaper to run

Fuel is typically the second biggest vehicle-related cost for businesses and can account for as much as 25%-30% of fleet expenditure. Fuelling an electric car can cost up to 90% less than fuelling a traditional car as you can fuel an electric car from just 2p per mile. This is much cheaper than the 10-12p per mile it costs to fuel a petrol or diesel car.

Electric vehicles are exempt from first year road tax and may unlock other tax benefits

Vehicle road tax is based on carbon dioxide emissions, and as fully electric cars do not produce emissions, they are exempt from first year road tax. Some plug-in hybrid electric cars with CO2 emissions less than 100 g/km, may need to pay anything from £0-£135 per year depending on the levels of CO2 emissions.

Drivers of fully electric company vehicles incur a Benefit In Kind tax of 1% in 2021-22 rising to 2% in 2022-23. Vehicles with emissions of less than 50g/km are also eligible for 100% first year capital allowances. This means with electric cars, you can deduct the full cost from your pre-tax profits. On a car costing around £40,000 this could amount to a tax relief of £7,600 in the first year.

Electric vehicles are cheaper to maintain

Electric vehicle engines have just three main components – the on-board charger, inverter and motor – and far fewer moving parts. This means that Service, maintenance and repair (SMR) costs for plug-in vehicles can be significantly lower than internal combustion engines.

Electric vehicles are exempt from congestion charges

If your vehicles are travelling in areas where Clean Air Zones exist or are about to be introduced, then this also adds to the savings of going electric.

Click here for more information on switching to an electric fleet.  

Ready to invest in our planet?

Whether you are seriously considering an investment in renewable technology or not, other businesses of just about every size and in every sector are taking action now.

At Bluestone Leasing, we are committed to helping UK businesses to cut their carbon footprint by making smart investments now and in the future. If you would like to spread the cost of solar panels, electric vehicles and charge points, LED lighting, or any other renewable assets that will reduce your carbon footprint, get in touch today.

We are proud to have received commended for Asset Finance Broker of the Year 2023 at the Business Moneyfacts Awards. After winning the award in 2022, we were pleased to be recognised again with a nomination at this year’s event.  

The Business Moneyfacts Awards is the largest business finance awards ceremony in the UK where each year the industry comes together to celebrate the very best brands in the business finance and commercial finance sectors. The winners across all

Managing director of Bluestone, Vineesh Madaan, said:

“We are hugely proud of the team for receiving a commended award for the Business Moneyfacts Asset Finance Broker of the Year. It is fantastic for them to be recognised for all the consistent and committed work they do for their clients all year round, particularly as this award is independently verified. We will continue providing our clients with the best of the best in all areas of commercial finance throughout 2023, 2024, and beyond.”

How were the winners chosen?

The finalists and winners of the Business Moneyfacts Awards are decided upon via a combination of methods. After a self-nomination process, the shortlist was created by the Moneyfacts panel through industry discussions and insights. Shortlisted finance brokers were then able to invite their own clients and lenders to submit testimonials about our quality of service. Those submitting responses were asked to consider all the areas of service that Bluestone offered. An internal judging panel then assessed and decided on the winners.

With the International Monetary Fund (IMF) predicting that the UK economy will be the worst performing of any G7 nation in 2023, all eyes were on Jeremy Hunt’s first Spring Statement on Wednesday 15^th March 2023.

We’ve put together a summary the key announcements from the Budget that affect UK business owners and their employees.

What’s the Spring Statement?

While the Autumn Budget is usually used to announce major policy change and the Spring statement is more of an update for the public, it is often used to provide a preview of any policy changes that may be forthcoming.

In his first statement as Chancellor in November, Jeremy Hunt overturned most of his predecessor Kwasi Kwarteng’s September mini-Budget. It directly addressed the economy with ambitions to halve inflation, boost the economy (by generating better-paid employment), and reduce the UK’s national debt.

Forecast for the UK Economy

The Office for Budget Responsibility forecast that the British economy is set to avoid a technical recession in 2023 but will contract by 0.2% before returning to growth in 2024. Jeremy Hunt’s budget focused on prompting those who have left their jobs to return to the workforce and boosting business investment.

• Growth of 1.8% predicted for next year, with 2.5% in 2025 and 2.1% in 2026.
• The UK’s inflation rate predicted to fall to 2.9% by the end of this year, down from 10.7% in the last three months of 2022.
• Underlying debt is forecast to be 92.4% of GDP this year, rising to 93.7% in 2024.

Corporation Tax Rises From 19% to 25%

The chancellor confirmed that the rate of corporation tax on company profits will rise from 19% to 25% from 1^st April 2023. The rise applies for companies with profits in excess of £250,000 in profits. According to Hunt, only 10% of businesses would pay the full rate; companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.

If you are interested in spreading the cost of your corporation tax bill over time to retain capital and enable you to manage your budget more effectively, a corporation tax loan could be the solution.

Click here for more information or get in touch with us today using the form at the end of the article.

Full Capital Expensing Policy Announced

Companies will be able to deduct investment in new machinery and technology to lower their taxable profits.

This new scheme will allow every pound invested by businesses in IT equipment, plants or machinery to be deducted (in full) from taxable profits, meaning companies will have to pay lower amounts of corporation tax.

Hunt stated that the policy was equivalent to a corporation tax cut worth an average of £9bn a year and would lead to a 3% increase in business investment a year. The policy would be in place for three years initially but might be made permanent in the future.

If you are considering investing in machinery or technology for your business, you may be able to spread the cost over time via an asset finance solution, retaining much-needed cash in your business.

Get in touch using the form at the bottom of the page and we’ll get back to you to discuss your business and your options.

Taxes and Earnings

• The cap on the amount workers can accumulate in pensions savings over their lifetime before having to pay extra tax (currently set at £1.07m) is to be abolished.
• Tax-free yearly allowance for pension pots – which has been frozen for 9 years – will rise from £40,000 to £60,000.
• The 5p cut to fuel duty on petrol and diesel (which was due to end in April) will remain for another year.

Energy Costs

• The Government committed to an investment of £20bn over the next two decades into low-carbon energy projects, with a focus on carbon capture and storage.
• Nuclear energy to be classed as environmentally sustainable for investment purposes, with promise of more public funding.
• £63m will be invested in leisure centres with rising swimming pool heating costs and projects to help them become more energy efficient.

Strengthening the Workforce

• 30 hours of free childcare for working parents in England expanded to cover one and two-year-olds, in a bid to help them work more.
• Families on universal credit to receive childcare support up front instead of in arrears, with the £646-a-month per child cap raised to £951.
• £600 “incentive payments” for those becoming childminders, and relaxed rules in England to let childminders look after more children.
• Funding for up to 50,000 places on new voluntary employment scheme for disabled people, called Universal Support.
• Tougher requirements to look for work and increased job support for lead child carers on universal credit.
• More places on “skills boot camps” to encourage over-50s who have left their jobs to return to the workplace.

Other Commitments

• There will be tax breaks and other benefits for 12 new Investment Zones across the UK, funded by £80m each over the next five years.
• Reduced paperwork for international traders, who will also be given longer to submit customs forms under streamlined rules.
• Commitment to raise defence spending by £11bn over the next 5 years.
• Prison sentences for those convicted of marketing tax avoidance schemes.
• An extra £10m over next 2 years for charities helping to prevent suicide.
• Streamlined approvals process for new medical products.
• £900m for new super-computer facility to support the UK’s AI industry.

In today’s post-pandemic world, more commercial tenants than ever before are seeking flexible working environments that simultaneously support their business objectives, budgets, growth plans, environmental commitments, and recruitment strategies.

To ensure that you are offering existing and potential tenants what they need not only to operate but to thrive – and can maximise the financial potential of your property – it is vital that you are aware of these demands and market trends and respond promptly. Of course, funding projects of this kind requires a significant investment which can cause delays, compromise, and/or financial strains on your working capital.

For many, the best course of action is to invest in an office fit-out project but, rather than paying in cash up front, to pay for it over time via affordable finance. This enables landlords to create the space they want while retain working capital and unlock tax savings.

What are the different classifications of office fit out?

If you are considering building a new commercial space or making improvements to an existing one, you may encounter at least one of the following terms in your finance conversations. There are 4 categories which cover the various stages of building condition during the design and build phase.

They are:

• Shell & core
• Cat A
• Cat B
• Cat A+.

What is a shell and core fit out?

‘Shell and core’ is the term for a building before a fit-out has taken place. It refers to the structure, such as a concrete and metal frame of a weather-proofed space that may look complete from the outside but is missing services like lighting and air conditioning.

What is a Cat A fit out?

A Cat A fit out is the basic finishing of an interior space, this type of fit out includes the installation of a building’s mechanical and electrical services. A Cat A project will also include finished internal walls, reception areas, lift lobbies, raised metal flooring, painted perimeter walls and a grid ceiling with fitted lights.

What is a Cat B fit out?

A Cat B fit out is the term used to describe a fully operational workplace that has been designed to a client’s unique specifications, e.g., building different rooms to choosing interior décor, floor finishes, kitchen facilities, furniture, branding, doors, partitions, lighting.

What is a Cat A+ fit out?

Cat A+ is the term for projects that produce a fully functional office that a tenant can move into and start operating straight away while only having to make minimal adjustments, e.g., the tenant can finish the space with their branding after they have moved in. This might include furniture, workstations, fitted kitchens, power, IT infrastructure, toilets, meeting rooms and social breakout spaces.

A Cat A+ fit out would usually be conducted by landlords to attract new tenants into their office space. Some choose to leave the space as Cat A (which would require the tenant to spend money on finishing it), but A+ fit-outs, also known and a Plug and Play space, is increasing in popularity with landlords who are offering flexible space under built to lease programmes.

What are the benefits of financing an office fit-out?

One of the most common obstacles for commercial landlords is how to fund improvements to their properties, but more and more are discovering the benefits of spreading the costs via finance.

Paying for an office fit-out via a finance agreement allows capital to be retained within the business rather than spent on depreciating assets and enable you, the landlord, and your client to create the space that you want rather than compromising due to budgetary constraints. Financing can also bring other benefits including:

• Fixed rates throughout the term, irrespective of base rate increases.
• A fully tax deductible solution.
• An unsecured arrangement that sits outside existing banking facilities, so other lines of credit will be unaffected.

How much would finance repayments be?

Every finance arrangement is unique and will be influenced by numerous factors including the scale of the project, the duration of the finance agreement, interest rates, and the credit rating/financial circumstances of the applicant. Here is an illustrative example to outline what repayments could look like.

A 5,000 sq. ft suite requiring a £400k Cat A + solution:*

Term	Monthly repayment	Potential tax savings
3 years	£12,959 + VAT	£136,211
5 years	£8,440 + VAT	£202,839

*Representative figures based on a number of assumptions regarding tax rates and allowances and that the customer is established with strong financials. Correct as of January 2023.

Interested in financing your office fit out or upgrades?

Whether you are the landlord of a retail space, restaurant, office block or an industrial unit/warehouse, Bluestone can secure finance for a range of projects from a simple furniture refresh to a multi-million-pound full fit-out.

We have specialised in providing complete finance solutions for commercial fit-out and refurbishment projects for over 25 years. With access to a large funding panel, Bluestone is ideally placed to secure quick, fair and affordable finance for your office fit out.

Get in touch to discuss your project today.

When it comes to finance, how do we know if a company is ‘healthy’ or not?

There are several possible metrics to consider, but one of the most useful is assessing the business’ cash flow, often referred to as a retained cash flow (RCP) calculation. This helps you to understand the net increase/decrease in your cash from one period to another and, as a result, your financial stability and any potential for growth.

Here we explain how to calculate your retained cash flow and, if your not pleased with the result, how you can improve the situation.

What is retained cash flow?

Retained cash flow (RCP) is a measure of the net change in cash and cash equivalents by the end of a financial period, i.e., the difference between incoming and outgoing cash after all debts have been paid and expenses deducted.  

What is a healthy retained cash flow?

If your business’ retained cash flow is positive, this suggests that it is financially healthy and could be ready for growth.

Minimal or negative retained cash flow would suggest that the company may be experiencing financial difficulties or is in a precarious position, and growth is unlikely in the foreseeable future.

Calculating retained cash flow

To calculate your retained cash flow you will need your business’ cash flow statements that cover the previous two financial periods.

1. Look for the ‘total cash flow’ figure on the statements.
2. Subtract expenses and dividends from each statement’s figure.
3. The difference between the two figures is your retained cash flow calculation.

For example:

• Statement 1’s cash flow figure = £200,000 (after paying out dividends and expenses)
• Statement 2’s cash flow figure of £160,000 (after paying out dividends and expenses)
  • £200,000-£160,000 = £40,000 in retained cash flow

Why is retained cash flow important?

By understanding your retained cash flow you can gauge how well you are managing your budget and the financial stability of your business. You can discover how much cash you have available to fund growth (Net Present Value projects), or how much you need to reduce your outgoings by to make growth possible in the future.

How to improve retained cash flow

It’s possible that doing your retained cash flow calculation could highlight issues in your financial strategy.

Try not to panic! There are several steps you can take to improve your incoming cash flow and your overall retained cash flow figure. In simple terms, the most effective ways to give your cash flow a boost are:

• Reduce outgoing expenses where possible.
• Optimise your debt management procedure to free up cash that is stuck in your books. This might include automating the debt collection process and/or offering incentives to customers who settle their invoices early.
• Review your pricing and/or investigate ways to generate more revenue
• Consider a cash flow solution from Bluestone.

Cash flow solutions from Bluestone

Cash flow loans

A cash flow loan is a short-term commercial loan that can provide financial support through challenging periods in business. In simple terms, you borrow the money you need, and pay it back in fixed instalments over a short period of time. 

Every business needs a healthy cash flow, but because of cash flow issues, many small business owners aren’t able to pay vendors, loans, bills, or even employees. This can prevent businesses from realising their ambitions and can, in extreme circumstances, force them to close down. 

A cash flow loan is there to bridge the monetary gap left by late payments and other unforeseen circumstances.

Click here for more information on cash flow loans.

Invoice finance

Invoice finance is a collective term for the various types of invoice based lending such as invoice discounting, selective invoice discounting, invoice factoring and spot factoring. As invoice financing is an unsecured business loan in place of your invoices, you won’t have to offer up physical assets from your company.

The concept for invoice finance is simple. When you raise a customer invoice, you do not need to wait for days, weeks or months for them to pay it. Instead, you also send the invoice to a lender. The lender will advance you up to 95% of the value of the invoice straight away. 

This means that you will get paid faster, boosting your cash flow and enabling you to focus on running your business.

When the customer has paid their invoice, you repay the lender. There will be interest and/or a processing fee to pay the lender for their service.

Click here for more information on invoice finance.

Asset finance

When you want to acquire new assets or invest in growth, you may not need to part with a large chunk of your cash all at once. In many cases it is possible to finance the purchase (i.e., spread the cost over a fixed period) via asset finance.

Financeable assets include (but are not limited to) technology, furniture, interior fit-out projects, plant machinery, and vehicles.

There are two types of asset finance: lease or hire purchase and while there are key differences between them, both make it possible for businesses to buy the equipment, machinery and vehicles that they need to achieve short-term goals and maximise their long-term success while maintaining a healthy cash flow.

Click here for more information on the types of asset finance.

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We can help your business to secure the best funding options and facilities, quickly and efficiently, whilst ensuring your short-term goals and long-term ambitions are considered in your financial strategy. 

If you are interested in discussing cash flow support, get in touch with us today. We will assess your business’ circumstances and work with you to decide on the best solution to your cash flow issues.

When businesses want to acquire assets they can either pay for them upfront with cash, or they can finance the purchase (i.e., spread the cost) via a finance lease or hire purchase.

Both finance leases and hire purchases make it possible for businesses to buy the equipment, machinery and vehicles that they need to achieve short-term goals and maximise their long-term success, but what are the differences between them?

Hire Purchase vs Leasing: How do they work?

Leasing: Leasing enables your business to use assets in exchange for rental payments over a fixed or minimum term. At the end of the contract, you can continue renting the asset, return them, or, in some cases, replace the equipment.

There are different types of leasing options. The most common is a straightforward finance lease which means you are responsible for paying for most of the asset’s cost over its life, and you’re also responsible for maintaining the asset as if you own it. You might also consider an operating lease which means you won’t pay for the full cost of the asset as you’re renting it for a period shorter than its useful life. As a result, the lease provider retains the risk and reward of ownership, while you remain responsible for keeping the asset in good working order during the agreement period.

Leasing works where the finance company pays the supplier for the equipment and in turn then becomes legal owners of the equipment, they then lease/hire the equipment back to the end user, the payments are charged plus VAT, which can be reclaimed as normal.  

Hire Purchase: With a hire purchase you agree to buy an asset from the lender but spread the cost over a specified period. You typically pay a deposit upfront and the finance company then charge a regular fixed payment. The last payment has an additional option to purchase fee which transfers legal title to your business. Unlike a lease, you will own the item at the end of the contract.

As the asset is paid for by the finance company, they will want the VAT to be paid up front on the cost of the equipment, this can be claimed back as normal.

Hire Purchase vs Leasing: The benefits

Leasing: There are several benefits to leasing, naturally a big one is retaining cash, why pay out for something upfront when you can pay over time for it. Another significant advantage are the tax savings, Leasing is highly tax efficient method of acquiring equipment whilst spreading the cost of paying for it. 

Hire Purchase: You have the legal right over the asset allowing you to claim capital allowances including any enhanced capital allowances that maybe available. Also subject to you making all the payments you will become the legal owner of the asset. 

Hire Purchase vs Leasing: What type of assets are best?

Leasing: Any assets can be financed but the majority must be tangible, some funders only require a minimum of 50% tangible others need it to be 80% plus. The benefit is that a lot of intangible items can be incorporated into the finance. This form of finance tends to suit assets that depreciate in value so can be refreshed at the end of the finance agreement. 

Hire Purchase: Assets that retain their value are generally financed under this method, because at the end of the finance ownership will be retained. Also should the end user want to utilise enhanced tax allowances then they would use this method. 

Hire Purchase vs Leasing: What rates am I likely to pay?

This depends on the credit rating of your organisation along with the amount being financed, the better the credit rating and bigger the lend the better the rate. 

Hire Purchase vs Leasing: What’s the tax treatment?

Leasing: 100% of the repayments are allowable against taxable income. For example if your taxable profit is £100,000 and the tax rate is 19%* you will pay £19,000 in tax. If you were to make £20,000 in lease payments then you would pay 19% of £80,000 i.e. £15,200 in tax, saving you £3,800 in tax. 

*Corporation tax is due to increase to 25% on 1^st April 2023.

Hire Purchase: The asset is classed as owned by the company so they will claim capital allowances as they would normally do for any other asset they own. They can also claim the interest paid on the finance against taxable income. 

Hire Purchase vs Leasing: What are the potential risks?

Leasing: You do not or will never legally own the asset, so if asset ownership is your thing then this will not be the product for you. 

Hire Purchase: If you do not have any enhanced capital allowances gaining full tax deduction for the purchase of the asset can take an exceptionally long time, also the VAT needs to be paid upfront so needs to be factored into cash flows. 

Hire Purchase vs Leasing: What happens at the end of the arrangement?

Leasing: At the end of the agreement, you must cancel the agreement with the funder. Once this happens, rather than to continue to pay rent you can pay a one-off infinite rental to retain uninterrupted continued use of the asset(s) allowing you to do what you want with the asset(s). 

Hire Purchase: Once all the payments are made (including the fee) the agreement ends and your business takes ownership of the asset.

Choosing the best option for your business

Whether you pursue a finance lease or hire purchase, your business will need to be approved by the lender to ensure you are able to afford the payments throughout the contract. It’s worth noting that if the asset you intend to finance is likely to generate additional revenue for your business that will put your business in a stronger financial position, and lenders can take this into consideration.

If your business has a poor credit rating, this may make it more complex to apply for finance and/or increase the interest rates that you will pay, but it will not necessarily prevent you from securing finance.

REMEMBER…

Before entering into any finance agreement, it is important to consider potential risks. For example, lenders will need to carry out credit checks when reviewing your application and this may impact your business’ credit report. There may also be additional charges to pay, depending on the terms, and if you default on payments, you may lose the asset and damage your credit rating.

Bluestone can help your business to obtain the right funding solutions and facilities, quickly and efficiently, whilst ensuring your short-term goals and long-term ambitions are considered in your financial strategy. 

If you are interested in financing assets for your business, get in touch with us today. We will assess your business’ short-term challenges and long-term ambitions and work with you to decide which finance solution would be the right choice.